Furniture sales & imports on growth path: industry analysts see a modest uptick in U.S. furniture sales, with even stronger market share gains in furniture imports.U.S. demand for household furniture is oil the rise, but not as fast as the growth of furniture imports. According to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. Aktrin of Oakville, ON, retail sales of household furniture should hit nearly $70 billion this year and grow by an additional 2.4% in 2005. BDO Seidman BDO Seidman, LLP is the United States arm of BDO International, one of the largest accounting firms outside of the Big Four. History BDO Seidman, LLP was founded as Seidman and Seidman in New York City in 1910 by Maximillian L. Seidman. LLP LLP - Lower Layer Protocol , an accounting and consulting firm Noun 1. consulting firm - a firm of experts providing professional advice to an organization for a fee consulting company business firm, firm, house - the members of a business organization that owns or operates one or more establishments; "he worked for a based in High Point, NC, reported that its most recent survey of residential furniture manufacturers found year to date new orders for January-March are up 15% over the first three months of 2003. "At this time last year, new orders were down 10% for the first quarter compared to the first quarter of 2002," BDO Seidman said. First quarter shipments were up 13% over 2003, BDO Seidman said. "We continue to believe that 2004 will be a good year for the industry as a whole." Meanwhile, as the industry held its collective breath awaiting the June 17 decision on the antidumping an·ti·dump·ing adj. Intended to discourage importation and sale of foreign-made goods at prices substantially below domestic prices for the same items. petition against Chinese wood bedroom furniture manufacturers, furniture imports continued to set new records. Such was the backdrop Wood & Wood Products had to work with in researching and writing its annual "State of the Residential Furniture Industry" report. Consumer Confidence Shakes Things Up Analysts foresee a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. year for the residential furniture industry, despite falling consumer confidence. In May, consumer confidence was at its lowest point since March 2003, shortly after the start of the war in Iraq, according to the Associated Press Associated Press: see news agency. Associated Press (AP) Cooperative news agency, the oldest and largest in the U.S. and long the largest in the world. . The AP reported the Consumer Comfort Index, which comes from an ABC ABC in full American Broadcasting Co. Major U.S. television network. It began when the expanding national radio network NBC split into the separate Red and Blue networks in 1928. News/Money Magazine poll, fell 2 points to -18 in the week ending May 30, down from -16 a week earlier. The poll has a margin of error of plus or minus 3 points. The poll showed rising gas prices contributed to the declining consumer confidence index Consumer Confidence Index A measure of consumer views regarding the current economic situation and consumer expectations for the future. Information for the index is compiled and released on the last Tuesday of each month by the Conference Board, an . Stefan Wille, president of Aktrin Furniture Information in Canada, said from a sales point-of-view, not a manufacturing shipments perspective, things look fairly good for North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. consumer spending Consumer demand or consumption is also known as personal consumption expenditure. It is the largest part of aggregate demand or effective demand at the macroeconomic level. on furniture. "There was a slow time in 2002 and 2003, but there is a good pickup of pent-up demand," Wille said. Even so, Furniture Brands International lowered its expectations for the 2004 second quarter because of a "slow down" in consumer spending. "Notwithstanding the strong order activity in the first quarter and highly successful results from the April Home Furnishings furnishings the extra type or quantity of hair on the head, tail, ears or legs, specified for a particular breed. For example, the feathers in setters, the beard in Bearded collies, the eyebrows in Schnauzers. Market, we have recently seen substantially weaker demand levels at each of our operating companies operating company A business that engages in transactions with outsiders. ," said W.G. (Mickey) Holliman, FBI chairman and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. . FBI, which owns Broyhill, Lane, Thomasville, Henredon and Drexel Heritage, had 2004 first quarter net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $658.5 million, compared to $613.8 million in the first quarter of 2003, an increase of 7.3%. Net earnings for the first quarter 2004 were $33.2 million; as opposed to $29 million for the same period last year. "While we had hoped the improved business conditions earlier in the year would be sustainable, it now appears that a definite slowdown in consumer furniture buying is occurring," Holliman continued. Holliman linked concerns about the effects of rising energy costs, uncertainties ha financial markets and international matters to weakened retail activity. He said he expects second quarter shipments to be slightly below 2003 levels. Ken Smith, an analyst at BDO Seidman, said Holliman's nervousness is to be expected from the head of a public company. "When you start (looking at) a public company, everything is quarter to quarter, and so everyone gets jittery," Smith said. Smith, on the other hand, is more confident. "All the other indicators are there (for a healthy business climate)," he said. Favorable Economic Indicators Economic indicators The key statistics of the economy that reveal the direction the economy is heading in; for example, the unemployment rate and the inflation rate. Smith and others noted the U.S. gross domestic product is growing and unemployment figures are falling. "The overall economy and personal income are improving, employment figures are looking good and housing starts remain stronger than ever," Wille said. "A lot of people predicted that we would have a housing slowdown greater than what we have seen so far. Even if housing does not go up in unit terms, people are buying bigger, more expensive housing and that's good for the furniture industry." According to the National Association of Home Builders The National Association of Home Builders (NAHB) is one of the largest trade associations in the United States. Headquartered in Washington, DC, the association organizes one of the largest conventions in North America, The International Builders' Show, which draws more than , the remodeling remodeling /re·mod·el·ing/ (re-mod´el-ing) reorganization or renovation of an old structure. bone remodeling market index, which gauges current market conditions and remodelers' calls for bids and jobs backlogs, hit a record high i n the first quarter of 2004. A healthy housing market index was even higher than the remodeling index, and held steady for two months. All these factors have a positive impact on furniture demand, and hopefully a slightly lower consumer confidence will not diminish their impact. Wille said the only thing he could see that could potentially dampen consumer demand for furniture is rising interest rates. He said furniture is an interest-sensitive item because more and more of it is bought on credit terms Credit Terms The conditions under which credit will be extended to a customer. The components of credit terms are: cash discount, credit period, net period. . Even if they climb, Smith said he believes already-depressed interest rates will remain low and residential furniture companies will have a good year. Many executives of public furniture manufacturing companies researched by Wood & Wood Products also anticipate a favorable year, despite the fact only a few of them posted big first quarter 2004 sales increases over 2003 first quarter. Public Furniture Firms Post Mixed Results WW&P research showed seven of nine public furniture manufacturers had sales increases when the most recent quarterly data for 2004 was compared to that of the same quarter of 2003. (See chart, page 48.) Bush Industries, another of the top 10 companies, is restructuring itself after declairing bankruptcy, and its most recent financial reports were not readily available. Sales increases and decreases for the selected companies were as follows: * Bassett Furniture Bassett Furniture is a furniture manufacturer located in Virginia, USA. Bassett Furniture is one of the oldest furniture manufacturers in Virginia and has been producing hand crafted furniture for over 100 years. , -1.3%. Shipments to Bassett Furniture Direct stores were up 11% over the previous year, but were below what the company anticipated. Rob Spilman Jr., president and CEO of Bassett Furniture Industries Inc., said his company's wood division needs bolstering. Bassett had first quarter 2004 sales of $76.6 million. "We are not satisfied with our current level of earnings," Spilman said. "Our focus continues to be on better execution at the store level and the profitability of our wood division. Our upholstery upholstery, general term for household fittings, hangings, curtains, cushions, and covers. It refers to stuffed, padded, and spring-cushioned furniture, such as chairs and sofas, or to the usually decorative materials and fabrics that cover them. division continued its solid performance even as we consolidated two plants into one facility, and we were pleased that our company-owned stores in Texas posted positive earnings for the quarter." * Chromcraft Revington, -6%. Sales were impacted by foreign import competition. Shipments of residential and commercial furniture, particularly bedroom, were dover. * Ethan Allen Interiors, +8.9%. "We remain optimistic op·ti·mist n. 1. One who usually expects a favorable outcome. 2. A believer in philosophical optimism. op that the business growth we have experienced is indicative of further economic expansion for the remainder of 2004," said Farooq Katbwari, chairman and CEO. * Flexsteel Industries Inc., +46%. Residential new sales increased 30% from the 2003 third quarter. * FBI, +7.3%. FBI continues to grow a U.S. presence of branded retail stores. * Hooker Furniture, +5%. "We expect net sales to increase 8% to 12% in the 2004 second quarter, compared to last year's second quarter, as we expect to ship much of our imported product order backlog and better capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. the brisk incoming order rate," said Paul J. Touts Jr., chairman and CEO. * La-Z-Boy, +0.7%. "During the past year, we continued to build and strengthen our proprietary distribution network, and of particular note are the mostly independently-owned New Generation La-Z-Boy Furniture Gallery stores, which have experienced increased traffic levels, higher average sales per consumer and greater total sales volumes than the prior format stores," said Kurt L. Darrow, president and CEO. * The Rowe Companies, +11%. "Our Rowe furniture Rowe Furniture is a furniture designer and manufacturer, founded in 1946 as Rowe-Jordan Furniture Company. External links
* Stanley Furniture, +15%. The company is expected to continue to grow its offshore sourcing program. Rising Material Costs Affect Furniture Prices As the business climate is expected to be good for furniture makers, they must contend with higher raw material costs for wood and petroleum-based products. Dorel Industries Dorel Industries Inc. (TSX: DII and NASDAQ: DIIB) is a Montreal, Quebec-based company which designs and manufactures for three areas: juvenile, home furnishings and recreational/leisure. Dorel employs approximately 4,800 people. has already faced rising costs. Dorel's revenues in its home furnishings sector were up 18.4% to $131.4 million in the first quarter of 2004, from $110 million in the 2003 first quarter. "The biggest issue of the quarter was high particleboard par·ti·cle·board or particle board n. A structural material made of wood fragments, such as chips or shavings, that are mechanically pressed into sheet form and bonded together with resin. prices and their impact on ready-to assemble furniture," said Jeffrey Schwartz Jeffrey Schwartz is a research professor at the University of California in Los Angeles (UCLA) who is a major proponent of the idea that human will, intention or consciousness is nonmaterialistic and dualistic, possibly even being a "mental force" similar to that of gravity. of Dorel. "We foresee improvement going forward as we begin to implement higher selling prices." Kurt Darrow, La-Z-Boy Inc. president and CEO, said his company's operating margins Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: continue to he strained not only because of competitive pricing pressures and weaker than anticipated sales results in some of the company's divisions, but also because of material costs increases. Higher prices are exactly what BDO BDO Big Day Out (Australian music festival) BDO Banco de Oro (Philippines) BDO 1,4-Butanediol BDO British Darts Organisation BDO Block Development Officer BDO Big Dumb Object Seidman's Smith is forecasting for the rest of the year. U.S. Furniture Imports Hit New High Wood residential furniture imports continued their surge during the first quarter of the year, besting the 2003 January-March period by 14.6% and climbing to a record $3.6 billion. China furthered its lead on the import pack in shipping $1.48 billion worth of household furniture to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , an increase of 23.6%. China's slice of the expanding import pie is now more than double that of Canada, its nearest rival. The possibility that a favorable rifling in the antidumping petition would result in the imposition of tariffs on Chinese wood bedroom furniture did not deter its continued flow of products into the U.S. market. Between January and March, wood bedroom furniture front China reached $375 million, an increase of 29.3% over the first quarter of 2003. U.S. imports of Canadian furniture increased a modest 4.2%. This is a far cry from the double-digit growth Canadian furniture manufacturers enjoyed throughout most of the 1990s, following the enactment of the North American Free Trade Agreement North American Free Trade Agreement (NAFTA), accord establishing a free-trade zone in North America; it was signed in 1992 by Canada, Mexico, and the United States and took effect on Jan. 1, 1994. . In contrast, Mexico, the other major NAVTA NAVTA National Association of Veterinary Technicians in America NAVTA North American Veterinary Technician Association NAVTA National Association of Victims of Transfusion-Acquired AIDS, Inc. partner, Saw furniture exports to the U.S. climb by 15.8% following a year of virtual stagnation Stagnation A period of little or no growth in the economy. Economic growth of less than 2-3% is considered stagnation. Sometimes used to describe low trading volume or inactive trading in securities. Notes: A good example of stagnation was the U.S. economy in the 1970s. . Vietnam's furniture industry, profiled in the December 2003 and January 2004 issues of Wood & Wood Products, registered the biggest percentage gain among the top source countries of U.S. furniture imports. Following the model implemented by China, Vietnam is aggressively seeking foreign investors to build new plants and capitalize on labor rates that are reportedly half or less of what furniture workers make in China. Among the companies to be lured to Vietnam is L.G. & J. Stickley. the company, which employs several hundred Vietnamese immigrants at its plant near Syracuse, NY, is building a 185,000-square-foot plant in Vietnam's Binnh Duong province to make new lines of furniture at entry level prices. The rapid rise of China, and now Vietnam, has come at the expense of Taiwan. Taiwan, which was the No. 1 source of U.S. furniture imports up until 1993, fell from ninth to 11th on the list of foreign furniture sources. Furniture Outsourcing Plays Big Role The estimated market share of U.S. household furniture imports jumped from 21.6% in 1994 to 41.4% last year, according to Mann, Armistead & Epperson. (See "Market Share" chart on page 52,) The increase was even greater in the wood household arena where imports' share has risen front 26.4% in 1994 to 51.8% last year. U.S. imports of upholstered products, which are more difficult to cost-effectively produce over seas because of their bulk and extensive fabric options available to consumers, have more than doubled in market share over the last 10 years. A major portion of these market share gains by foreign sources has been fueled by domestic, furniture manufacturers that have either moved some of their production offshore or are outsourcing new furniture lines from foreign manufacturers instead of producing them in their U.S. plants. According to a review of 10 public furniture companies by Mann, Armistead & Epperson, Hooker Furniture imports an estimated 40% of its furniture; Ethan Allen and Furniture Brands each import 22% of their products. In sharp contrast., Bush Ind., a manufacturer of ready-to-assemble furniture Ready-to-assemble (RTA) furniture, also known as "knock-down furniture" or "flat packs", is furniture supplied as a kit of flat parts and fasteners to be assembled, usually by the end user, with simple tools. that recently filed Chapter 11 with the intent to reorganize re·or·gan·ize v. re·or·gan·ized, re·or·gan·iz·ing, re·or·gan·iz·es v.tr. To organize again or anew. v.intr. To undergo or effect changes in organization. , Flexsteel Ind. and Rowe Furniture Companies do not import any of their products. (See chart on page 48.) Ethan Allen, which a couple of years ago formed a strategic partnership with the Chinese furniture History China is one of the longest standing major civilizations in the world today. The familiar Asian minimalist aesthetic so often associated with Japan had its origins in China as far back as 1500 BC. giant Markor, recently opened its fourth furniture store in Beijing. In an April 20 press release announcing Ethan Allen's third-quarter results, Kathwari said, "Strategic initiatives undertaken during the past year to help position the company for (the) next phase of economic growth are already providing benefits ... Stronger marketing programs, more efficient U.S. manufacturing operations Manufacturing operations concern the operation of a facility, as opposed to maintenance, supply and distribution, health, and safety, emergency response, human resources, security, information technology and other infrastructural support organizations. and better sourcing capacity, both domestic and abroad, have enabled us to increase sales, improve profitability and continue generating healthy levels of operating cash which has been, and will continue to be utilized to grow our business and increase shareholder value." Stanley Furniture has also adopted a strategy of "blending efficient domestic manufacturing ... with intelligent outsourcing of certain component parts and finished goods, (allowing) us to offer a compelling value proposition," according to Jeffrey Scheffer, president and CEO.
PUBLIC FURNITURE MANUFACTURERSUTILIZATION
OF IMPORTS ($ IN MILLIONS)
Manufacturer Trailing % $ Exposure
12-Month Imported Imports to China
Sales (Estimated)
Bassett Furniture $312.0 13.0 $40.6 Yes
Bush Industries 340.2 0.0 0.0 No
Chromcraft Revington 202.8 15.0 30.4 Minimal
Ethan Allen Interiors 905.6 22.0 199.2 Yes
Flexsteel Industries 294.0 0.0 0.0 Yes
Furniture Brands Intl. 2,377.0 22.0 522.9 Yes
Hooker Furniture 261.9 40.0 104.8 Yes
La-Z-Boy Inc. 2,167.6 10.0 216.8 Yes
The Rowe Companies 0.0 0.0 Yes
Stanley Furniture 331.4 10.0 24.1 Minimal
Totals $7,413.3 15.3 * $1,138.8
* Estimated % of total imported product based on trailing 12-month
sales; among the seven that import, the average is 19.4%.
Source: Mann, Armistead & Epperson Ltd., based on company reports and
FBW estimates.
MARKET SHARE: ALL HOUSEHOLD FURNITURE IMPORTS/
U.S. DOMESTIC MARKET BY PKMWET CATEGORY
Total Wood Upholstered Metal Bedding
Household Household Household Household Household
1994 21.6% 26.4% 6.1% 26.8% 1.2%
1998 28.2% 33.5% 8.6% 41.2% 3.0%
2001 36.2% 43.0% 12.7% 50.6% 4.0%
2002 38.9% 47.7% 13.7% 53.7% 4.1%
2003 41.4% 51.8% 16.4% 56.5% 4.8%
Sources: Mann, Armistead & Epperson Ltd., using information from the
American Furniture Manufacturers, Assn., International Sleep Products
Assn. and International Trade Administration.
TOP 10 SOURCES OF
U.S. FURNITURE IMPORTS
* Figures in thouasnds of dollars
Jan-Mar'04 Jan-Mar'03 % Change
China 1,477 1,195 23.6
Canada 632 605 4.2
Italy 288 293 1.7
Mexico 176 152 15.8
Malaysia 167 137 21.9
Indonesia 158 156 1.3
Thailand 113 91 24.2
Brazil 84 61 37.7
Vietnam 63 37 70.3
Philippines 53 58 -8.6
Top 10 Total 3,211 2,785 15.3
World Total 3,601 3,143 14.6
Source: U.S. Department of Commerce
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